Lumcloon plans to build a 300 megawatt gas-fired plant at Ferbane in Ireland, helping to meet the need for the flexibility provided by small-scale conventional power production as the country looks to step up capacity in renewable energy.

It received planning permission three years ago, but a lack of clarity over the regulatory environment, including the grid connection, has delayed construction. A spokesman said the power station could be built within three years.

The ability of such plants to switch on and off at short notice makes them ideal as a supplement to renewables, such as wind power, that have intermittent production patterns.

However, Lumcloon Energy said that EirGrid's plans to offer seven-year contracts instead of the usual 20-year deals breached European Union competition law because they favoured incumbent companies that can afford to take short-term views.

"EirGrid has a special responsibility as a dominant undertaking in the transmission market not to hinder genuine competition in the closely associated market for system services," Lumcloon Energy said in a letter written to Ireland's Single Energy Market (SEM) committee, a regulatory body that governs Ireland's electricity market.

EirGrid submitted a series of proposals to the SEM committee in May after a consultation period in which Lumcloon Energy was also involved, EirGrid said in a statement on Wednesday.

"The arrangements for system services in the power market, referred to in the statement, are the subject of a regulatory consultation process and have not yet been finalised," EirGrid said.

The power plant developer set a deadline for September 30 for the SEM committee to respond to its concerns, the company said. If they are not addressed, Lumcloon Energy has threatened to take the case to the European Court of Justice.

"If EU competition law is breached, EirGrid will be exposed to substantial fines and claims for damages," Lumcloon Energy said.